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Ch 10 SPENDING

A brief overview of CH 10
by

Brad Hayes

on 27 April 2015

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Transcript of Ch 10 SPENDING

SPENDING--CHAPTER 10
HISTORICAL PERSPECTIVE
Until 1940, public sector (government) spending was relatively low.
Only spent on national defense and other necessities.
Post WWII-Post Depression
-government became much more involved--big increases in spending
Minimum wage, social security, welfare, education, new methods of transportation, Cold War, etc.
ALL NEW EXPENSES AFTER THE 30's-40's

THE FEDERAL BUDGET
Developed by the
President and his OMB (Office of Management and the Budget)

The budget must pass the House and the Senate,
in that order, separately.
Each may edit the budget proposed by the President
Once through both houses, the “new” budget is sent back to the president.
He can sign it into law or
VETO
it
On RARE occasions, the president is given the power of
LINE ITEM VETO
BASICALLY...
Watch the first 3 minutes and answer the questions on the handout with your teacher.
OTHER TYPES OF SPENDING
REMEMBER
The public sector (gov't) makes much of its purchases from the private sector.

PURCHASES
The GOVERNMENT actually receives something in return for its money.
Ex. Paying Boeing for a drone, paying the CDC for supplies of Flu Vaccine, etc.
TRANSFER PAYMENTS
The GOVERNMENT does NOT receive anything tangible for its spending.
Ex. Paying the CDC for medical research, money spent on
ENTITLEMENTS
Transfer payments between levels of government are called
GRANTS IN AID
.
PURCHASE OR TRANSFER PAYMENT?
FOOD STAMPS
TRANSFER PAYMENT
MISSLE DEFENSE SYSTEM
PURCHASE
ROAD UPGRADES
TRANSFER PAYMENT
MEDICAL RESEARCH
TRANSFER PAYMENT
SUPPLIES OF H1N1 VACCINE
PURCHASE
http://www.usdebtclock.org/
When we run a deficit, we must make up the difference
by BORROWING.
Government borrowing (Selling Bonds) can actually drive interest rates up for all of us—the
CROWDING OUT EFFECT
Increased government borrowing drives interest rates up for ALL BORROWERS
This "CROWDS OUT" some potential borrowers--they can't afford the rate.
Watch the first 6 minutes!
This can be done by selling bonds to individuals or
other countries.
BONDS MUST BE PAID BACK PLUS INTEREST
Full transcript